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Telstra spokeswoman Karina Keisler said the company was disappointed that the goal of deregulation expressed previously by Communications Minister
Stephen Conroy
had been lost.

“If anything, if the proposals were adopted we would have more regulation imposed on more industry participants by a new regulator," Ms Keisler said. “The danger in expanding regulation in this way in dynamic convergent industries is that it risks impeding innovation and growth in the Australian sector."

Similar concerns were expressed by John Stanton, chief executive of the Communications Alliance.

He said the internet already provided more diversity than there had ever been and questioned the logic of applying old content regimes to new digital platforms.

He warned that the review was in danger of “missing the point" and said it threatened to stifle innovation and put local entrepreneurs at a disadvantage to global competitors.

“The beauty of the digital economy is the explosion of new content types and sources it engenders," he said.

“A converged regulatory framework should celebrate and support that growth. The prospect of seeking to impose Australian content requirements on international content suppliers might also deter the supply of some sources of content to Australian consumers."

The Communications Alliance raised concerns about the report’s proposed creation of a digital economy regulator with “very broad and so far undefined rule-making powers". Mr Stanton said the convergence review had set out to reduce regulation but some of its interim recommendations appeared to be heading in the opposite direction.

On a more positive note, he backed the report’s calls for a market-based approach to spectrum allocation.

Steve Dalby, chief regulatory officer for the country’s third largest internet service provider,
iiNet
, said he supported moves to restructure the industry regulator to give it more of a role in developing the internet sector.

He questioned whether consumer protection should be within its remit.

“Every state already has a consumer protection agency, the Australian Competition and Consumer Commission clearly has the national accountability and the Telecommunications Industry Ombudsman is designed to provide a strong industry ombudsman," Mr Dalby said.

“Adding another layer may just result in added cost, increased reporting and more red tape."

Nobody at Yahoo!7 or ninemsn would comment. Google Australia spokesman Johnny Luu said it was still looking at the report and had no comment at this stage.